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Section 8 Company Formation

Section 8 Company is Company formed with the objective of promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object. It is established majorly for charitable or not-for-profit purposes.

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Advantages of Section 8

No minimum Capital

Section 8 Company does not require a prescribed minimum paid-up share capital.

Limited Liability

Liabilities of the members of Section 8 Company are limited to their capital contributions.

Credibility

Section 8 Companies enjoy more credibility as compared to NGOs, societies and trusts because they are recognized by Central Government’s licence.

Stamp Duty

Section 8 Company is exempted for the payment of stamp duty applicable for registration as applicable in case of other structures such as private limited or a public limited company.

Tax Exemption

Section 8 company can apply for exemption u/s 12AA of the Income Tax Act. It is also eligible for registration u/s 80G of the Income Tax Act.

Foreign Donations

Section 8 company can receive the foreign contributions after getting itself registered under Foreign Contribution (Regulation) Act, (FCRA), 2010.

HOW STARTUP MOVERS CAN HELP YOU?

  • Name Approval Letter
  • License
  • Drafting of MOA/AOA
  • Procuring DSC
  • DIN Approval Letter
  • PAN Card of the Company
  • TAN No of the Company
  • Incorporation kit to help you open a bank account
  • Filing of INC 20A for Commencement of Business
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Process of Registration

  • Application for reservation of name has to be made in form RUN (Reserve Unique Name) facility.
  • The name of Section 8 Company shall include words such as Foundation, Federation, Association, Forum, Chambers, Confederation, Council, Electoral Trust etc.
  • Maximum 2 names can be proposed at a time and the fees payable is INR 1,000.

Digital Signature Certificate are required to file various eForms on MCA portal, digitally sign documents for the incorporation of the company and other applications.

  • MOA acts as a charter document which defines the purposes/objectives of a company.
  • AOA is a document which lays down the rules and regulations for internal management of the company.
  • MOA and AOA have to be signed by each subscriber who shall mention his name, address, description and occupation in the presence of a witness who shall attest the signature and add his name, address, description and occupation.

After name approval, application is required to be made in Form INC-12 to the Registrar for a licence under Section 8(1) of Companies Act, 2013. Fees for INC-12 is INR 2,000.

On approval of Form INC-12 and getting licence in Form INC-16, application for incorporation in Form SPICe 32 is required to be filed.

Who and Why should you get this registered?

If anyone wishes to do something for the society at large without having any self-interest, this is the best form to go for it. It enjoys several privileges which are not generally available to the trusts or societies registered under their respective acts. The credibility factor is also increased due to the licence obtained from the Central Government.

Documents required for Incorporation

ID Proof

Self-attested PAN Card of the first shareholder(s) and director(s)

Address Proof

Bank Statement/Utility bill in name of director (not older than two months)

Photo

Passport size photograph of the director(s)

Registered Office Proof
  • Utility bill (should not be older than two months)
  • No objection certificate from the owner of premises for the Registered Office address of the company
  • Rental Agreement with the owner of registered office and rent receipts (if premises is rented)
  • Registry Proof or House Tax Receipt (in case of owned property)
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Frequently asked questions

Everything you need to know about the product and billing.

There is no restriction in the provisions of the Companies Act, 2013 for a registered Trust to become a member of Section 8 Company. In case of unregistered trusts, provisions of section 89 would be applicable.

Section 8 Company, if covered under limits as prescribed under Rule 3 of Companies (Appointment of Directors) Rules, 2014 is required to appoint women director under second proviso to Section 149(1). Also, every existing section 8 company falling under the prescribed criteria should have complied with this provision within one year from the commencement of this provision i.e. by March 31, 2015.
Also, if section 8 company is incorporated under Companies Act, 2013 and falls under second proviso to Section 149(1), then, it should comply with the requirement of appointing women director within six months of the incorporation of the company.

Clause 5(ii) of the Form INC 13 provided under rule 19(2) of the Companies (Incorporation) Rules, 2014 provides that – “No portion of the profits, other income or property aforesaid shall be paid or transferred, directly or indirectly, by way of dividend, bonus or otherwise by way of profit, to persons who, at any time are, or have been, members of the company or to any one or more of them or to any persons claiming through any one or more of them.” In view of the above there is no restriction in payment of bonus to employees, however bonus cannot be paid to a member, even in his capacity as an employee.

A section 8 company can take loan from its members and pay interest thereupon, subject to the provisions of Chapter V of the Act read with rules made thereunder.

The activities which may be passed by the Board of section 8 companies through circulation instead of at a meeting, as given under section 179(3) are:
  • To borrow monies
  • To invest the funds of the company
  • To grant loans or give guarantee or provide security in respect of loans.

There are special requirements to be complied with under the Foreign Contribution and Regulation Act, 2010 before a Section 8 Company can receive any contributions or donations from overseas/outside India from non-residents. The provisions of this act are in addition to the provisions under the Companies Act.

A Section 8 Company is prohibited from issue of bonus shares because:
  • As per section 8(1)(b) of the Act, Section 8 Company shall intend to apply its profits, if any, or other income in promoting its objects;
  • As per section 8(1)(c) of the Act, Section 8 Company should intend to prohibit the payment of any dividend to its members; and

There is no restriction in payment of remuneration to an employee/director. In case the employee is also a member, no remuneration or other benefit in money or money’s worth can be given to him except payment of out of pocket expenses, reasonable and proper interest on money lent, or reasonable and proper rent on premises let to the company.

As per exemption notification dated 05th June, 2015, the definition of Company Secretary in section 2(24) of the Companies Act, 2013 is not applicable on Section 8 Companies.
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